The Chairman of the Africa Union High Level Panel on Illicit Financial Flows, and former South African President Mr. Thabo Mbeki, in 2015 reported in the findings of the Panel, that the African continent was annually losing a staggering $50 billion, due to illicit financial outflow.
In the 2015 report, Mr. Mbeki estimated that about 40 per cent of this illicit outflow of funds was from Nigeria, and came in different forms including corrupt business practices, tax evasion and transfer of profits by multinationals.
To state that this is very worrisome is to state the very obvious. At the recently concluded African Union high level panel on IFFs inter-ministerial meeting held in Abuja, Mr Mbeki said the loss has increased exponentially from $50 billion to about $80 billion annually.
Indeed, this estimate may well be short of reality as accurate data does not exist for all financial transactions out of Africa. This increase in illicit financial flows indicates a serious breakdown of international borders and barriers facilitated by innovative schemes and practices of the financial sector operators.
Globalization has helped turned the world into a global village with broken down borders. Yet, the advent of technological advancement such as online transfers and a range of e-payment platforms, informal IOUs/Halawa Schemes, and crypto currencies among others, have made the movement of funds and assets from one jurisdiction to another so very easy.
Illicit financial flows, IIFs are basically funds moved across borders illegally. Such funds are fraudulently earned, and in a number of instances, transferred and/or utilized illegally. The rate of IFFs out of Africa has no doubt become a major concern. This is partly due to the mind-boggling magnitude of the funds stolen from Sub-Saharan Africa and the negative impact of such flows on Africa’s agenda for development and governance.
It is estimated that over $40 billion (N30.6 trillion) was fraudulently transferred out of Nigeria in the last five years through various sources, such as money laundering, tax avoidance, corruption, tax evasions, illegal mining activities, drugs and human trafficking.
The adverse effects of illicit financial outflows include, drain on Nigeria’s foreign exchange reserves, reduced tax revenue, stifled trade and investment inflows and a weakening of the financial system of the victim countries (African Countries in particular).
Unfortunately, illicit financial outflows are facilitated by some international tax havens that permit creation of disguised corporations – shell companies, anonymous trust accounts, and fake charitable foundations which in most cases are cover for corruption, terrorism financing tax evasion and money laundering.
It is in the context of this, that the subject of Illicit Financial Flows has gained global attention as a critical area that needs international collaboration and cooperation and a multi-stakeholder approach to be effectively tackled.
The complex nature of corruption and money laundering investigations generally require assets recovery efforts beyond domestic borders. Where stolen assets have been stashed abroad, successful tracing and recovery of such asset often depends on assistance from foreign jurisdiction which makes international cooperation essential for the successful recovery of assets.
The issue of a concerted need for international collaboration particularly on the part of African countries formed the thrust of the 8th Commonwealth Regional Conference for Heads of Anti-Corruption Agencies in Africa, which was hosted by the Economic and Financial Crimes Commission, EFCC in May this year at the Transcorp Hilton, Abuja.
Heads of the continent’s anti-graft agencies resolved that the complex nature of corruption and money laundering investigations required assets recovery efforts beyond domestic borders. Where stolen assets have been stashed abroad, successful tracing and recovery of such asset often depends on assistance from foreign jurisdiction which makes international cooperation essential for the successful recovery of assets.
On the part of the EFCC, a lot of work has been done in creating a robust international framework for tackling corruption and illicit financial flows in Nigeria. There are a number of multilateral treaties or instruments which Nigeria is a signatory that requires countries to cooperate with one another on matters bothering on investigations, asset confiscation and returns.
Nigeria has agreement with several countries including the Swiss, UK, UAE and the US just to mention a few for the return of stolen assets and successes have been achieved especially with the Swiss authorities in repatriation of about $322 million Sani Abacha money back to Nigeria. Agreement to this effect was signed recently at Global Forum on Asset Recovery, GFAR, which took place in December 2017 at Washington DC USA. In the same vein, United Kingdom returned assets worth $85Million USD from the controversial $1.3 billion USD Malabu deal which revolves around “OPL 245” believed to be the most valuable oil field in West Africa in a case that is being described as the largest corruption scandal ever witnessed in global oil industry involving Malabu Oil and Gas and oil giants Shell and ENI. Efforts are ongoing for the recovery of hundreds of millions of dollars of the Abacha loot stashed in financial institutions in London, Paris, Jersey and Liechtenstein.
Recognizing the adverse effects of corruption on the African Continent, the Africa Union, AU Heads of states and Governments declared year 2018 as African Year of Combating Corruption under the theme “Winning the Fight Against Corruption: A Sustainable Path to Africa’s Transformation”.
To further emphasize the resolve to fight against graft in the continent, the leaders endorsed President Muhammadu Buhari of Nigeria as its Anti-Corruption Champion that will lead the continent’s war against corruption in 2018 and beyond.
The endorsement of Mr. President was in recognition of his efforts, firm commitment and the enviable successes he has recorded in the fight against corruption in Nigeria since the inception of his administration.
No doubt, for there to be successes in combating illicit financial flows, there must be a resolute and firm political will, which has been evident on the part of Mr. President. This is made obvious in his tremendous support given to the EFCC in its enforcement activities, which has contributed in no small measure to the successes so far achieved.
Nigeria has been at the forefront of sponsoring resolutions on asset recovery and return and illicit financial flows which have been adopted at various conferences of states parties of the United National Convention against Corruption, UNCAC.
It is also very important to underscore the commitment of the present administration of President Muhammadu Buhari to transparent and efficient management of returned assets through the public financial management systems for social investment schemes.
In terms of domestic efforts in curbing illicit financial flows, the EFCC has recorded tremendous success in its enforcement activities by the number of money laundering and corruption cases undergoing investigations and proceedings in court. While progress has been recorded in strengthening the anti-Money Laundering legal framework and the compliance regime in Nigeria, monitoring the movement of cash outside the financial sector remains a major challenge due to the country’s predominantly cash based economy. Recently, cross border physical cash movement has been on the increase. To curb this menace, the EFCC set up an interagency task force.
The Money Laundering Act 2011 (As Amended), provides for the total forfeiture of funds that are not declared to the Nigerian Customs at the entry and exit points of the country. The EFCC has therefore confiscated large sums of money at our airports and land borders and several offenders have been arrested, prosecuted, convicted and the cash forfeited to federal government of Nigeria.
The Commission has also recorded significant convictions from 2015 to date. While conviction records stand at 703 over the same period, about 35 was in respect of cross border cash movement involving forfeiture of about $28.5 million USD to the Federal Government of Nigeria. The success recorded is as a result of cooperation and synergy that exist between the EFCC and sister agencies such as the Nigerian Customs Service and the National Drug Law Enforcement Agency.
The Commission is also prosecuting an international bribery case involving Malabu oil and gas, Shell and Nigeria AGIP oil bothering on bribery of Nigeria officials for allocation of oil well in the Niger Delta.
The recently introduced whistle blower policy which provides for monetary reward for whistle blowers is a wonderful tool that has assisted the commission in recording successes. Examples are: $43.8 m USD discovered in Ikoyi, Lagos,N40 million abandoned at Kaduna international airport 250m discovered in ware House in Balogun Market in Lagos and $9.8 million discovered in Kaduna at a building belonging to a former GMD NNPC.
The Commission has effectively utilised legislations on conviction and non-conviction based asset recovery to recover billions of Naira in cash and assets linked to military generals and other politically exposed persons domestically and abroad.
Currently the Commission is prosecuting not less than 16 former governors and ex-top government officials for money laundering and related offences with convictions recorded this year in the cases of former governors Jolly Nyame and Joshua Dariye (both former governors) for procurement and money laundering offences.
Between 2015 to November 2018, the commission recovered over N794 billion made up of interim and final recoveries for third parties, corporate organizations, government agencies and individuals.
Recoveries have also been made in real estates, vessels, automobiles, machinery/equipment, shops, petroleum products and other perishables.
Our desire to curb illicit financial flows further led to the establishment of a dedicated special tax investigation team to work closely with officials of the FIRS and the Revenue Mobilization and Fiscal Commission in identifying and prosecuting culprits who have evaded tax. The synergy between the Commission and these agencies have led to recovery of N27,712,334,455.64 between January to December 2017 alone.
However, a lot still has to be done by countries in the area of asset tracing, recovery and return by putting in place the necessary legal and institutional framework for repatriation of stolen assets. More resources have to be dedicated to the legal and technical expertise to handle complex and costly cases involving developing countries.
On the Continental stage, the need for African anti-corruption agencies to collaborate and synergize more than ever to ensure maximum cooperation devoid of complex technical policy and legal intricacies, cannot be overemphasized.
There must create a robust international legal framework for combating illicit financial flows and enduring assets recovery regime in Africa. Traditional challenges militating against effective international cooperation must be surmounted. Such barriers include a lack of effective legal basis for cooperation in some countries, differences in legal and procedural frameworks, language barriers, resource issues, dual criminality issues and jurisdictional issues.
There must be concerted efforts to check these challenges and the first step is to develop a guideline on how governments and law enforcement agencies can work together to recover stolen assets so that these traditional challenges that hinder international cooperation would be reduced.
We should build informal networks and relationships to ensure sharing of intelligence among our law enforcement organizations. There must be spontaneous exchanges of information even in absence of a formal request. Periodic bilateral meetings to discuss international cooperation issues bothering on corruption and other cross boarder crimes.
The need for an effective domestic legislation is also imperative. We must take measures to strengthen assets forfeiture and recovery legal frame work in our countries. There must be synergy between law enforcement institutions, tax authorities etc in Nigeria. Exchange of information is also very crucial.
Civil forfeiture regime otherwise known as (Non conviction Based) assets confiscation must be enhanced by creating a legal framework for the regime. In Nigeria, Proceeds of Crimes Bill incorporating (Non conviction Based) assets confiscation regime is already before the National Assembly for enactment. The passage of the Bill will eventually encourage multilateral treaties between Nigeria and other countries especially in respect of return of stolen assets. We must implement comprehensive, strategic policies and best practices for rapid tracing, freezing and repatriating stolen assets.
While Nigeria has made some progress as regards anti-corruptions laws such as the Money Laundering (amendment) Bill, Whistle Blowers Bill and Witness Protection Bill which are also before the National Assembly, it is critical for other African countries to enact such similar laws.
Africa must therefore unite to fight the scourge of IFF from the Continent by seeking practical measures that will strengthen domestic legal frameworks and international cooperation mechanisms through global and continental instruments of UNCAC and AUCPCC respectively.
We must ensure fiscal and public contracting transparency. We must strengthen our procurement process to ensure transparency and accountability. Our President recently signed two executive orders one of which is to improve the business environment with Bureau for Public Procurement publishing bids for all public procurement as well as winners of the bids. This policy was designed to ensure public trust in the procurement process.
It is also desirable for African countries to establish public central registers of companies’ where beneficial ownership information on all legal entities and banks to reveal true beneficial owners of accounts in Bank accounts and financial institutions can be sourced. We propose that our various Companies and Allied Matters laws should be strengthened to ensure disclosure by companies of any substantial share holdings. Also, we must implement the principles of Open Government Partnership and open data standards as platform for implementation of beneficial ownership. Other measures will include providing Comprehensive legal framework for implementation, effective International collaboration, capacity building, strict enforcement of sanctions, and sustained engagement with organized private sector in various countries to curb illicit financial flows. Above all the Civil Society Organizations must be recognized as watchdog.
We must embrace enhanced investigation techniques for gathering intelligence and tracing stolen assets. In addition we must train our investigators on asset forfeiture and recovery management techniques. There must be cooperation and collaboration between law enforcement Agencies of our countries especially in respect of exchange information on illicit financial flows.
We must insist that recovered stolen assets should be returned to the country of origin, in line with Article 51 of UNCAC without any precondition. Furthermore, both returning and receiving countries should agree to apply the highest possible standards of transparency at all stages of the recovery and return process. We should also commit to apply the highest possible standards of accountability in the management and disposal of recovered and returned stolen assets by applying the returned stolen assets to remedy the harm their theft caused to the society.
Africa must seek to address the salient regulatory issues involving value chain to effectively curb Illicit Financial Flows.
The use of settlements as well as any other form of victims’ compensation should be transparent. We should strengthen institutions and systems to prevent and prosecute tax evasion.
The admonition of President Buhari to fellow African leaders to ratify the AUCPCC should be acted on as a matter of urgency, and sign the instrument. There is also the urgent need for African countries to develop a common position on Asset recovery and repatriation. All Member African States should implement the 8 – point recommendation of the 2015 High Level Panel report on IFF. This, in my opinion is the panacea for curbing the scourge of illicit financial flows in Nigeria and indeed all of Africa.
–Magu is the Acting Chairman of the Economic and Financial Crimes Commission (EFCC).
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